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Vol. 135, No. 31 — August 4, 2001
Aggregate Financial Exposure (Banks) Regulations
Statutory Authority
Bank Act
Sponsoring Department
Department of Finance
REGULATORY IMPACT ANALYSIS STATEMENT
Aggregate Financial Exposure (Banks) Regulations
Aggregate Financial Exposure (Insurance Companies) Regulations
Aggregate Financial Exposure (Trust and Loan Companies) Regulations
Ancillary Activities (Insurance Companies, Canadian Societies and Insurance Holding Companies) Regulations
Commercial Loan (Cooperative Credit Associations) Regulations, Regulations Amending the
Commercial Loan (Insurance Companies, Societies and Insurance Holding Companies) Regulations
Commercial Loan (Trust and Loan Companies) Regulations, Regulations Amending the
Complaint Information (Banks) Regulations
Complaint Information (Authorized Foreign Banks) Regulations
Complaint Information (Foreign Insurance Companies) Regulations
Complaint Information (Canadian Insurance Companies) Regulations
Complaint Information (Retail Associations) Regulations
Complaint Information (Trust and Loan Companies) Regulations
Entity Associated with a Foreign Bank Regulations
Equity of a Bank or a Bank Holding Company Regulations
Equity of a Cooperative Credit Association Regulations
Equity of a Trust and Loan Company Regulations
Equity of an Insurance Company or Insurance Holding Company Regulations
Exempt Classes of Foreign Banks Regulations
Exempt Debt Obligation Transactions (Banks and Bank Holding Companies) Regulations
Exemption from Restrictions on Investments (Banks, Bank Holding Companies and Foreign Banks) Regulations
Exemption from Restrictions on Investments (Cooperative Credit Associations) Regulations
Exemption from Restrictions on Investments (Insurance Companies, Insurance Holding Companies and Societies) Regulations
Exemption from Restrictions on Investments (Trust and Loan Companies) Regulations
Factoring Entity Regulations
Finance Entity Regulations
Financial Leasing Entity Regulations
Form of Proxy (Banks and Bank Holding Companies) Regulations
Information Processing Activities (Banks and Authorized Foreign Banks) Regulations
Investment Limits (Bank Holding Companies) Regulations
Investment Limits (Banks) Regulations
Investment Limits (Canadian Societies) Regulations
Investment Limits (Cooperative Credit Associations) Regulations
Investment Limits (Insurance Companies) Regulations
Investment Limits (Insurance Holding Companies) Regulations
Investment Limits (Trust and Loan Companies) Regulations
Manner of Calculation (Foreign Banks) Regulations
Material Percentage Regulations
Minority Investment (Bank Holding Companies) Regulations
Minority Investment (Banks) Regulations
Minority Investment (Cooperative Credit Associations) Regulations
Minority Investment (Insurance Companies) Regulations
Minority Investment (Insurance Holding Companies) Regulations
Minority Investment (Trust and Loan Companies) Regulations
Name Use (Foreign Banks) Regulations
Name Use by Non-financial Businesses (Excluded Entities) Regulations
Name Use in Securities-related Transactions (Banks and Bank Holding Companies) Regulations
Name Use in Securities-related Transactions (Insurance Companies and Insurance Holding Companies) Regulations
Prohibited Activities Respecting Real Property (Foreign Banks) Regulations
Prospectus (Banks and Bank Holding Companies) Regulations
Prospectus (Insurance Companies and Insurance Holding Companies) Regulations
Prospectus Exemptions (Bank Holding Companies) Regulations
Prospectus Exemptions (Banks) Regulations, Regulations Amending the
Prospectus Exemptions (Cooperative Credit Associations) Regulations, Regulations Amending the
Prospectus Exemptions (Insurance Companies) Regulations, Regulations Amending the
Prospectus Exemptions (Insurance Holding Companies) Regulations
Prospectus Exemptions (Trust and Loan Companies) Regulations, Regulations Amending the
Regulatory Capital (Bank Holding Companies) Regulations
Regulatory Capital (Banks) Regulations, Regulations Amending the
Regulatory Capital (Cooperative Credit Associations) Regulations, Regulations Amending the
Regulatory Capital (Insurance Companies) Regulations, Regulations Amending the
Regulatory Capital (Insurance Holding Companies) Regulations
Regulatory Capital (Trust and Loan Companies) Regulations, Regulations Amending the
Security Certificate Transfer Fee (Banks, Bank Holding Companies, Insurance Companies and Insurance Holding Companies) Regulations
Specialized Financing (Cooperative Credit Associations) Regulations
Specialized Financing (Banks) Regulations
Specialized Financing (Life Companies) Regulations
Specialized Financing (Retail Associations) Regulations
Specialized Financing (Trust and Loan Companies) Regulations
Specialized Financing (Foreign Banks) Regulations
Subsidiaries that Hold Bank Holding Company Shares Regulations
Subsidiaries that Hold Insurance Holding Company Shares Regulations
Total Assets for Public Holding Requirements (Trust and Loan Companies) Regulations
Total Assets for Supervisability and Public Holding Requirements (Banks and Bank Holding Companies) Regulations
Total Assets for Supervisability and Public Holding Requirements (Insurance Companies and Insurance Holding Companies) Regulations
Description
The Canadian financial services sector has been undergoing rapid change for the better part of a decade. In 1996, the federal government created the Task Force on the Future of the Canadian Financial Services Sector to review and advise on the nature of change taking place in the sector. In 1998, the Task Force issued a report which included numerous conclusions and recommendations. These findings were carefully reviewed by committees of both the House of Commons and the Senate. These committees largely endorsed the findings of the Task Force. Based on the work of the Task Force and the parliamentary committees, the federal government issued a policy paper in June 1999 entitled Reforming Canada's Financial Services Sector: A Framework for the Future. This document served as the policy foundation for Bill C-8, An Act to Establish the Financial Consumer Agency of Canada and to Amend Certain Acts in Relation to Financial Institutions (FCA Act). Bill C-8 received Royal Assent on June 14, 2001.
The FCA Act provides for significant amendments to the laws governing federal financial institutions. As an integrated package, the amendments brought about by the FCA Act promote efficiency and growth in the financial services sector, foster domestic competition, empower and protect consumers of financial services, and improve the regulatory environment for financial institutions.
A key characteristic of the FCA Act is the use of regulations to provide for a more flexible regulatory framework for the financial sector. This allows the government to make modest policy adjustments to the framework in response to significant changes taking place in the global environment in which financial institutions operate. Many regulations are being proposed or modified in order to achieve this policy objective of creating a more flexible regulatory regime.
The remaining amendments bring existing regulations in line with changes made to the financial institutions statutes under the FCA Act.
This is the first of several packages of regulations that will be brought forward to complete the policy intent of the FCA Act. This first package includes regulations that are essential to the operation of the FCA Act and must be in place when the provisions of the FCA Act are brought into force. For this reason, it is expected that this package of regulations will be accompanied by an order bringing the FCA Act into force upon final publication.
Of the 75 regulations included in this package, 37 flow from the restructured permitted investment regime. Another 18 regulations are primarily related to the new holding company regime. Six regulations flow from the creation of the new Financial Consumer Agency of Canada (FCAC). A further six regulations are related to the changes to the foreign bank regime in order to place foreign banks on an equitable footing to domestic banks. The remaining eight regulations relate to various other policy objectives of the FCA Act.
This document discusses the regulatory impact of the following proposed new regulations:
Aggregate Financial Exposure (Banks) Regulations, Aggregate Financial Exposure (Insurance Companies) Regulations, Aggregate Financial Exposure (Trust and Loan Companies) Regulations
The FCA Act allows banks, insurance companies and trust and loan companies that are controlled by a widely held bank holding company or a widely held insurance holding company to engage in certain transactions with related parties that are not federally regulated financial institutions. These regulations define "aggregate financial exposure" for the purposes of calculating aggregate financial exposures that they may have to these related parties.
Ancillary Activities (Insurance Companies, Canadian Societies and Insurance Holding Companies) Regulations
The legislation allows insurance companies to invest in entities that engage in an activity that is ancillary to the business of the insurance company. The regulations specify permitted activities including the provision of safety and risk prevention services, and the operation of rehabilitation and training centres. The effect of these regulations is to ensure that an insurance company can invest in an entity that engages in an activity in which the insurance company itself would be permitted to engage in-house.
Regulations Amending the Commercial Loan (Cooperative Credit Associations) Regulations, Commercial Loan (Insurance Companies, Societies and Insurance Holding Companies) Regulations, Regulations Amending the Commercial Loan (Trust and Loan Companies) Regulations
The legislation limits the commercial lending activities of financial institutions (other than banks), but permits the powers to be expanded by regulations. The current regulations are being amended to (a) add entities to the list of prescribed international agencies — loans to such entities are excluded from the definition of "commercial loan"; (b) apply to insurance holding companies; and (c) prescribe the commercial loan limits for societies and property and casualty insurance companies. These limits are being transferred from the Investments (Canadian Companies) Regulations or the Investments (Canadian Societies) Regulations and are not being changed.
Complaint Information (Authorized Foreign Banks) Regulations, Complaint Information (Banks) Regulations, Complaint Information (Canadian Insurance Companies) Regulations, Complaint Information (Foreign Insurance Companies) Regulations, Complaint Information (Retail Associations) Regulations, Complaint Information (Trust and Loan Companies) Regulations
The legislation requires financial institutions to inform customers who have a complaint about a product or service relating to a consumer provision contained in federal financial institutions statutes on how to contact the FCAC. The regulations specify the address of the FCAC, that the information must be provided to consumers by means of a written statement, and that customer complaints to the FCAC must be in writing.
Entity Associated with a Foreign Bank Regulations
Part XII of the Bank Act contains a number of rules applying to entities associated with a foreign bank. These regulations provide for the exemption of certain classes of entities from the status of being an entity associated with a foreign bank. The regulations clarify the government's policy that those rules are not applicable to certain classes of entities which otherwise would fall within the meaning of an entity associated with a foreign bank. The regulations exempt foreign governments that do not carry on a business that includes financial services activities and exempt certain classes of commercial entities controlled by foreign governments. The regulations also exempt, in certain circumstances, Canadian financial institutions and holding companies, as well as Canadian entities which control a foreign bank that does not enter Canada. The regulations include a provision authorizing the Minister to deem an entity not to be an entity associated with a foreign bank.
Equity of a Bank or a Bank Holding Company Regulations, Equity of a Cooperative Credit Association Regulations, Equity of a Trust and Loan Company Regulations, Equity of an Insurance Company or Insurance Holding Company Regulations
The term "equity" is used in the legislation in respect of the ownership rules for banks and demutualized insurance companies, the public float requirements and certain other requirements which are triggered by the size of the financial institution. These regulations define the term "equity."
Exempt Classes of Foreign Banks Regulations
These regulations provide for the exemption of certain classes of entities from the definition of foreign bank as that term is used in legislation. Specifically, the regulations clarify the government's policy that a foreign government that does not carry on a business which includes financial services activities is exempt from the application of the definition of foreign bank.
Exempt Debt Obligation Transactions (Banks and Bank Holding Companies) Regulations
The legislation requires banks and bank holding companies to obtain the approval of the Superintendent for various asset transactions, subject to regulations. The current regulations, which exempt the securities of certain international agencies and widely distributed debt obligations, are being amended to apply to bank holding companies and to add entities to the list of prescribed agencies.
Exemption from Restrictions on Investments (Banks, Bank Holding Companies and Foreign Banks) Regulations, Exemption from Restrictions on Investments (Cooperative Credit Associations) Regulations, Exemption from Restrictions on Investments (Insurance Companies, Insurance Holding Companies and Societies) Regulations, Exemption from Restrictions on Investments (Trust and Loan Companies) Regulations
The legislation imposes control and approval requirements in respect of certain investments, subject to regulations. The regulations set out rules relating to the investment powers of entities in which a financial institution holds a substantial investment (defined as more than 10 percent of the voting shares, or 25 percent of the equity of the entity), but not control. The effect of these regulations is to clarify that these "substantial investment" entities are not subject to the same investment rules as their financial institution owners.
Factoring Entity Regulations
The legislation imposes control and approval requirements on financial institutions that invest in "factoring entities." The regulations define "factoring entities" to be the entities whose activities involve acting as a factor in respect of accounts receivable.
Finance Entity Regulations
The legislation imposes control and approval requirements on financial institutions that invest in "finance entities," and subjects them to certain consumer protection measures. The regulations define "finance entities" to be entities whose activities involve issuing credit cards or lending money.
Financial Leasing Entity Regulations
The legislation permits financial institutions to invest in financial leasing entities in certain circumstances. The definition of "financial leasing" in the legislation describes the activities of a financial leasing entity. Consistent with the existing legislative regime, these regulations (a) define certain terms used in the definition; (b) prescribe activities related to the financial leasing of personal property for the purpose of the definition; and (c) set out restrictions and limitations on the activities of a financial leasing entity.
Form of Proxy (Banks and Bank Holding Companies) Regulations
The legislation permits the form of proxies to be specified in regulations. The current regulations are being amended so as to apply to bank holding companies. They describe the form for a proxy, a management proxy circular and a dissident proxy circular to be the same as those prescribed in the regulations of the Canada Business Corporations Act.
Information Processing Activities (Banks and Authorized Foreign Banks) Regulations
The legislation allows regulations to be made that would authorize banks to engage in certain information-processing activities. These regulations prescribe a range of information-processing activities that generally relate to areas such as payroll processing, clearing, and management of deposit accounts. The effect of these regulations is to carry forward the current business powers of banks under the new framework.
Investment Limits (Bank Holding Companies) Regulations, Investment Limits (Banks) Regulations, Investment Limits (Canadian Societies) Regulations, Investment Limits (Cooperative Credit Associations) Regulations, Investment Limits (Insurance Companies) Regulations, Investment Limits (Insurance Holding Companies) Regulations, Investment Limits (Trust and Loan Companies) Regulations
The applicable legislation places restrictions on the amount of real property and equity investments of a financial institution based on a prescribed percentage of regulatory capital. In addition to these restrictions on individual investments, there is an aggregate restriction on both real property and equity investments. Prior to the FCA Act, these prudential limits were prescribed in the applicable legislation and two separate regulations — the Real Property Interests Valuation Regulations and the Equity Valuation Regulations. These two regulations have been combined to create the Investment Limits Regulations. The prescribed limits for real property and equity investments are being moved from legislation to these regulations. They also prescribe classes of institutions that are exempted from these limits. Cooperative credit associations will now be subject to the same limits as other federally regulated financial institutions. New regulations have been created for bank holding companies and insurance holding companies.
Manner of Calculation (Foreign Banks) Regulations
A number of the legislative provisions in Part XII of the Bank Act involve determining the financial portion of an entity's business or activities. These regulations set out the manner of making the calculation for determining the portion of an entity's business and activities that is financial for the purpose of these provisions.
Material Percentage Regulations
The legislation sets out the conditions under which the Minister may designate a foreign bank, and in effect its conglomerate, to be a designated foreign bank and therefore subject to certain provisions set out in Part XII of the legislation. The legislation provides that "real" foreign banks, as opposed to "near" foreign banks, may be designated. The Minister may designate a foreign bank only in certain circumstances, including where a prescribed percentage of the foreign bank conglomerate's total assets or total revenues is derived from total assets and total revenues of the foreign bank and other "real" foreign banks in its conglomerate. The regulations set out that the prescribed material percentage is 35 percent.
Minority Investment (Bank Holding Companies) Regulations, Minority Investment (Banks) Regulations, Minority Investment (Cooperative Credit Associations) Regulations, Minority Investment (Insurance Companies) Regulations, Minority Investment (Insurance Holding Companies) Regulations, Minority Investment (Trust and Loan Companies) Regulations
The legislation imposes a control requirement on certain types of investments. The existing regulations provide an exemption to the control requirement for certain minority investments held by federally regulated financial institutions as long as the value of these minority investments does not exceed 50 percent of an institution's regulatory capital. The existing regulations are being amended to reflect new cross-referencing in the FCA Act. New regulations have been created for bank holding companies and insurance holding companies.
Name Use (Foreign Banks) Regulations
The legislation places restrictions on the use of certain terms such as "bank," "banker" or "banking." These regulations clarify the permitted use of these terms in a description of a corporate relationship with a foreign bank and also clarify the permitted use of the name and logo of a foreign bank. The regulations include rules governing the ability of an entity to identify itself as a member of a group in a description of its corporate relationship with a foreign bank.
Name Use by Non-financial Businesses (Excluded Entities) Regulations
The legislation provides that no person commits an offence who uses the word "bank," "banker" or "banking" in relation to a business that is not financial in nature, unless the business is carried out by a prescribed entity. These regulations set out a list of prescribed entities.
Name Use in Securities-related Transactions (Banks and Bank Holding Companies) Regulations, Name Use in Securities-related Transactions (Insurance Companies and Insurance Holding Companies) Regulations
The legislation places restrictions on the use of certain terms such as "bank," "banker" or "banking." These regulations provide for the use of the name of a bank, a bank holding company, an insurance company, or an insurance holding company in documents associated with securities transactions, if such usage is required by law or if the bank, bank holding company, insurance company, or insurance holding company, as the case may be, gives its written permission for such usage.
Prohibited Activities Respecting Real Property (Foreign Banks) Regulations
The legislation places certain restrictions on the financial services activities of a foreign bank but permits certain real property activities. These regulations set out prohibitions that apply to a foreign bank's real property activities outside of its authorized foreign bank branch. These prohibitions prevent foreign banks from engaging in financial services activities other than in accordance with authorized activities in Part XII of the legislation.
Prospectus (Banks and Bank Holding Companies) Regulations, Prospectus (Insurance Companies and Insurance Holding Companies) Regulations
The Bank Act and the Insurance Companies Act specify that the form and content of a preliminary prospectus and a prospectus be prescribed in regulations. The current regulations have been amended to apply to bank holding companies and insurance holding companies.
Prospectus Exemptions (Bank Holding Companies) Regulations, Regulations Amending the Prospectus Exemptions (Banks) Regulations, Regulations Amending the Prospectus Exemptions (Cooperative Credit Associations) Regulations, Regulations Amending the Prospectus Exemptions (Insurance Companies) Regulations, Prospectus Exemptions (Insurance Holding Companies) Regulations, Regulations Amending the Prospectus Exemptions (Trust and Loan Companies) Regulations
The legislation permits regulations to prescribe exemptions to the prospectus requirements. The current regulations have been amended to provide clarity around certain definitions. New regulations have been created to apply to bank holding companies and insurance holding companies.
Regulatory Capital (Bank Holding Companies) Regulations, Regulations Amending the Regulatory Capital (Banks) Regulations, Regulations Amending the Regulatory Capital (Cooperative Credit Associations) Regulations, Regulations Amending the Regulatory Capital (Insurance Companies) Regulations, Regulatory Capital (Insurance Holding Companies) Regulations, Regulations Amending the Regulatory Capital (Trust and Loan Companies) Regulations
The legislation uses the term "regulatory capital" in respect of a number of provisions. The current regulations defining "regulatory capital" are being amended to reflect technical changes such as new cross referencing in the FCA Act and fixing a discrepancy between the English and the French versions. New regulations have been created for application to bank holding companies and insurance holding companies.
Security Certificate Transfer Fee (Banks, Bank Holding Companies, Insurance Companies and Insurance Holding Companies) Regulations
The banking and insurance legislation allows the amount that may be charged for the transfer of a security to be set in regulations. Prior to the FCA Act, there were separate regulations for banks and insurance companies dealing with the amount to be charged. This amended regulation combines the provisions for banks and insurance companies and is extended to apply to bank holding companies and insurance holding companies. The regulations set the maximum fee that can be charged for the transfer of a security at $5.
Specialized Financing (Banks) Regulations, Specialized Financing (Cooperative Credit Associations) Regulations, Specialized Financing (Foreign Banks) Regulations, Specialized Financing (Life Companies) Regulations, Specialized Financing (Retail Associations) Regulations, Specialized Financing (Trust and Loan Companies) Regulations
The legislation allows regulations to be made expanding the scope of entities in which financial institutions are permitted to invest (e.g., commercial companies). These regulations expand the scope subject to a number of constraints and caps. The constraints imposed on these investments relate to the types of activities in which the entity may engage, the size of the financial institution's investment in the entity, and the length of time that the financial institution can hold the investment. These regulations also provide relief from certain approval and control requirements set out in the legislation.
Subsidiaries that Hold Bank Holding Company Shares Regulations, Subsidiaries that Hold Insurance Holding Company Shares Regulations
The applicable legislation restricts a bank holding company and an insurance holding company from holding its own shares and restricts their respective subsidiaries from holding those shares, except as provided for in the regulations. These regulations permit the subsidiaries that are regulated securities entities to hold shares of the parent bank holding company or insurance holding company valued at not more than one percent of the regulatory capital of the bank holding company or the insurance holding company. Regulations reflecting the same policy are currently in place for banks and insurance companies.
Total Assets for Public Holding Requirements (Trust and Loan Companies) Regulations, Total Assets for Supervisability and Public Holding Requirements (Banks and Bank Holding Companies) Regulations, Total Assets for Supervisability and Public Holding Requirements (Insurance Companies and Insurance Holding Companies) Regulations
The applicable legislation permits the Minister to restrict the growth of the total assets of federally regulated financial institutions with equity of less than $5 billion but more than $1 billion that do not meet the 35 percent public holding requirement. With regard to banks, bank holding companies, and certain insurance companies and insurance holding companies, the applicable legislation also permits the Minister to restrict the growth of total assets of an entity that does not meet the legislated criteria with respect to supervisability. These regulations define "total assets" for the application of these requirements.
It is expected that approximately 50 to 60 more regulations will be brought forward for publication within the next three months. These remaining regulations will complete the policy package envisaged by the June 1999 policy paper and the FCA Act.
Alternatives
The enclosed regulations are required in order to bring the provisions of the FCA Act into force. They are required either to maintain the existing policy framework or to round out the implementation of the new policy framework, as outlined in the description. As such, no alternatives to the regulations were considered.
Benefits and Costs
The enclosed regulations are integral to the overall policy objectives of the FCA Act. As such, their cost-benefit justification cannot be separated from the overall costs and benefits of the legislative package itself.
The FCA Act provides an improved regulatory structure that balances the competing interests of stakeholders. While individual legislative measures may impose some burden on a particular stakeholder group, there are overall net benefits for all stakeholders. For example,
— consumers benefit from strengthened consumer protection measures, a more transparent complaints handling process, and the advantages brought about by increased competition;
— financial institutions may face modestly increased regulation through enhanced regulatory rules and a strengthened consumer protection regime. However, they benefit from greater organizational flexibility and broader powers. The creation of the Financial Consumer Agency of Canada is expected to have an annual budget of about $7 million, the cost of which will be passed on to financial institutions in the form of allocated assessment; and
— the Office of the Superintendent of Financial Institutions (OSFI) may face moderately increased regulatory challenges as a result of provisions intended to encourage new entrants, but the potential cost is offset by improved prudential regulatory powers and increased competition. The exact cost implications for OSFI of the legislative package are not easily calculable. The transfer of responsibility for administering the consumer provisions of the financial institutions legislation to the FCAC will reduce OSFI's costs. The relaxed new entrant requirements may increase OSFI's workload and costs, some of which will be borne by the new entrants. However, the streamlined approval process will reduce the cost of regulation and cost burden directly borne by financial institutions. In all, it is expected that OSFI's cost of regulation will not increase substantially.
Each of the regulations included in this and subsequent packages is intended to implement a specific aspect of the overall policy structure introduced by the FCA Act. The regulations may either be beneficial, cost/benefit neutral, or impose a burden on one or more relevant stakeholder groups. Since the weighing of costs and benefits has been done at the legislative level, the regulations must be examined in light of their contribution to the balance of the overall policy framework that was approved in the FCA Act.
While most regulations merely round out the policy intention of a provision in the legislation, in a few cases the scope of the burden borne by a stakeholder group is at least partially determined by the regulations. We note the following regulations in this regard:
Complaint Information Regulations — These regulations would require financial institutions to adjust their existing written documentation and policy procedures to reflect the new complaint handling requirements. Consumers would be required to provide their complaints in writing to the FCAC. These are appropriate requirements for the implementation of the policy intent of the legislation.
Security Certificate Transfer Fee Regulations — These regulations set a maximum amount that a financial institution may charge to transfer securities. The $5 amount strikes a balance between the cost the institution faces in carrying out the transaction and ensuring that shareholders are not unreasonably charged for these services. The amount is the same as the limit that existed in the previous regulations. It has also been extended to new types of institutions (i.e., insurance and bank holding companies).
Consultation
The FCA Act and its related regulations are part of a policy development process dating back to 1996. At every stage of the process, stakeholders have been consulted. More recently, working drafts of the enclosed regulations were shared with stakeholders and, wherever feasible, their comments have been reflected in revisions. For example, concerns were raised about the scope of the Finance Entity Regulations. In response, the regulations were amended to narrow their scope of application by eliminating language that might have been interpreted too broadly. Also, consumer groups requested that the upcoming Public Accountability Statements Regulations — to be included in a subsequent package — include a requirement for reference to an institution's priorities in the area of community development. These changes have been made.
The following organizations were consulted:
— Action Réseau Consommateur (Fédération nationale des associations de consommateurs du Québec)
— Canadian Bankers Association
— Canadian Community Reinvestment Coalition
— Canadian Life and Health Insurance Association
— Consumers' Association of Canada
— Credit Union Central of Canada
— Democracy Watch
— Insurance Bureau of Canada
— Insurance Consumer's Group
— National Anti-Poverty Organization
— Option Consommateurs
— Public Interest Advocacy Centre
— Service d'aide aux consommateurs/Consumer Aid Services
In the course of consultations, the Canadian Bankers Association (CBA) expressed concerns about the differences in the use of the term "regulatory capital" in regulations and the definition of "regulatory capital" for supervisory purposes. This concern has been raised by the CBA in the past. The CBA was advised that the Government would continue to explore the issue in greater detail with industry but that it would proceed with the current proposed regulations at this time.
The Canadian Bankers Association has also raised the concern about the implementation timing of the consumer-related provisions of the FCA Act, particularly the Access to Basic Bank Services Regulations and the Index-linked Deposits Interest Disclosure Regulations. The Government is of the view that four months is a reasonable time period for implementing these regulations and is confident that the new Financial Consumer Agency of Canada will take into consideration the fact that it will take industry time to implement them fully.
Various industry groups have sought assurances from Government that it remains the intention of government to issue other regulations in addition to those noted in this package. It has been communicated to these stakeholders that regulations will be issued subsequent to this package to complete the policy framework announced in the June 1999 paper, Reforming Canada's Financial Services Sector: A Framework for the Future.
Compliance and Enforcement
The Office of the Superintendent of Financial Institutions will be responsible for ensuring compliance with prudential aspects of the Regulations. The Financial Consumer Agency of Canada will be responsible for ensuring compliance with consumer-related Regulations.
Contact
Gerry Salembier, Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance, L'Esplanade Laurier, East Tower, 15th Floor, 140 O'Connor Street, Ottawa, Ontario K1A 0G5, (613) 992-1631 (Telephone), (613) 943-1334 (Facsimile).
PROPOSED REGULATORY TEXT
Notice is hereby given that the Governor in Council proposes to make the following annexed Regulations:
— pursuant to section 978 (see footnote 1) of the Bank Act (see footnote 2), the Aggregate Financial Exposure (Banks) Regulations;
— pursuant to section 1021 (see footnote 3) of the Insurance Companies Act (see footnote 4), the Aggregate Financial Exposure (Insurance Companies) Regulations;
— pursuant to section 531 (see footnote 5) of the Trust and Loan Companies Act (see footnote 6), the Aggregate Financial Exposure (Trust and Loan Companies) Regulations;
— pursuant to section 1021 (see footnote 7) of the Insurance Companies Act, the Ancillary Activities (Insurance Companies, Canadian Societies and Insurance Holding Companies) Regulations;
— pursuant to section 463 (see footnote 8) of the Cooperative Credit Associations Act (see footnote 9), the Regulations Amending the Commercial Loan (Cooperative Credit Associations) Regulations;
— pursuant to section 1021 (see footnote 10) of the Insurance Companies Act, the Commercial Loan (Insurance Companies, Societies and Insurance Holding Companies) Regulations;
— pursuant to section 531 (see footnote 11) of the Trust and Loan Companies Act, the Regulations Amending the Commercial Loan (Trust and Loan Companies) Regulations;
— pursuant to section 978 (see footnote 12) of the Bank Act, the Complaint Information (Banks) Regulations;
— pursuant to section 978 (see footnote 13) of the Bank Act, the Complaint Information (Authorized Foreign Banks) Regulations;
— pursuant to section 1021 (see footnote 14) of the Insurance Companies Act, the Complaint Information (Foreign Insurance Companies) Regulations;
— pursuant to section 1021 (see footnote 15) of the Insurance Companies Act, the Complaint Information (Canadian Insurance Companies) Regulations;
— pursuant to section 463 (see footnote 16) of the Cooperative Credit Associati-tions Act, the Complaint Information (Retail Associations) Regulations;
— pursuant to section 531 (see footnote 17) of the Trust and Loan Companies Act, the Complaint Information (Trust and Loan Companies) Regulations;
— pursuant to subsection 507(17) (see footnote 18) of the Bank Act, the Entity Associated with a Foreign Bank Regulations;
— pursuant to section 978 (see footnote 19) of the Bank Act, the Equity of a Bank or a Bank Holding Company Regulations;
— pursuant to section 463 (see footnote 20) of the Cooperative Credit Associations Act, the Equity of a Cooperative Credit Association Regulations;
— pursuant to section 531 (see footnote 21) of the Trust and Loan Companies Act, the Equity of a Trust and Loan Company Regulations;
— pursuant to section 1021 (see footnote 22) of the Insurance Companies Act, the Equity of an Insurance Company or Insurance Holding Company Regulations;
— pursuant to section 14.2 (see footnote 23) of the Bank Act, the Exempt Classes of Foreign Banks Regulations;
— pursuant to section 978 (see footnote 24) of the Bank Act, the Exempt Debt Obligation Transactions (Banks and Bank Holding Companies) Regulations;
— pursuant to paragraphs 474(a) and (b) (see footnote 25) and 522.23(b) (see footnote 26) of the Bank Act, the Exemption from Restrictions on Investments (Banks, Bank Holding Companies and Foreign Banks) Regulations;
— pursuant to paragraphs 396(a) and (b) (see footnote 27) of the Cooperative Credit Associations Act, the Exemption from Restrictions on Investments (Cooperative Credit Associations) Regulations;
— pursuant to paragraphs 501(a) and (b) (see footnote 28) and 554(9)(a) and (b) (see footnote 29) of the Insurance Companies Act, the Exemption from Restrictions on Investments (Insurance Companies, Insurance Holding Companies and Societies) Regulations;
— pursuant to paragraphs 459(a) and (b) (see footnote 30) of the Trust and Loan Companies Act, the Exemption from Restrictions on Investments (Trust and Loan Companies) Regulations;
— pursuant to section 978 (see footnote 31) of the Bank Act, section 463 (see footnote 32) of the Cooperative Credit Associations Act, section 1021 (see footnote 33) of the Insurance Companies Act and section 531 (see footnote 34)of the Trust and Loan Companies Act, the Factoring Entity Regulations;
— pursuant to section 978 (see footnote 35) of the Bank Act, section 463 (see footnote 36) of the Cooperative Credit Associations Act, section 1021 (see footnote 37) of the Insurance Companies Act and section 531 (see footnote 38) of the Trust and Loan Companies Act, the Finance Entity Regulations;
— pursuant to section 978 (see footnote 39) of the Bank Act, section 463 (see footnote 40) of the Cooperative Credit Associations Act, section 1021 (see footnote 41) of the Insurance Companies Act and section 531 (see footnote 42) of the Trust and Loan Companies Act, the Financial Leasing Entity Regulations;
— pursuant to section 978 (see footnote 43) of the Bank Act, the Form of Proxy (Banks and Bank Holding Companies) Regulations;
— pursuant to subsections 410(3) (see footnote 44) and 539(3) (see footnote 45) of the Bank Act, the Information Processing Activities (Banks and Authorized Foreign Banks) Regulations;
— pursuant to sections 929, 941 and 978 (see footnote 46) of the Bank Act, the Investment Limits (Bank Holding Companies) Regulations;
— pursuant to sections 467 (see footnote 47), 479 (see footnote 48), and 978 (see footnote 49) of the Bank Act, the Investment Limits (Banks) Regulations;
— pursuant to sections 553 (see footnote 50), 564 (see footnote 51) and 1021 (see footnote 52) of the Insurance Companies Act, the Investment Limits (Canadian Societies) Regulations;
— pursuant to sections 389 (see footnote 53), 403 (see footnote 54), and 463 (see footnote 55) of the Cooperative Credit Associations Act, the Investment Limits (Cooperative Credit Associations) Regulations;
— pursuant to sections 494 (see footnote 56), 509 (see footnote 57) and 1021 (see footnote 58) of the Insurance Companies Act, the Investment Limits (Insurance Companies) Regulations;
— pursuant to sections 970, 984 and 1021 (see footnote 59) of the Insurance Companies Act, the Investment Limits (Insurance Holding Companies) Regulations;
— pursuant to sections 452 (see footnote 60), 467 (see footnote 61) and 531 (see footnote 62) of the Trust and Loan Companies Act, the Investment Limits (Trust and Loan Companies) Regulations;
— pursuant to section 978 (see footnote 63) of the Bank Act, the Manner of Calculation (Foreign Banks) Regulations;
— pursuant to section 978 (see footnote 64) of the Bank Act, the Material Percentage Regulations;
— pursuant to section 936 (see footnote 65) of the Bank Act, the Minority Investment (Bank Holding Companies) Regulations;
— pursuant to section 474 (see footnote 66) of the Bank Act, the Minority Investment (Banks) Regulations;
— pursuant to section 396 (see footnote 67) of the Cooperative Credit Associations Act, the Minority Investment (Cooperative Credit Associations) Regulations;
— pursuant to section 501 (see footnote 68) of the Insurance Companies Act, the Minority Investment (Insurance Companies) Regulations;
— pursuant to section 977 (see footnote 69) of the Insurance Companies Act, the Minority Investment (Insurance Holding Companies) Regulations;
— pursuant to section 459 (see footnote 70) of the Trust and Loan Companies Act, the Minority Investment (Trust and Loan Companies) Regulations;
— pursuant to section 978 (see footnote 71) and subsection 983(16) (see footnote 72) of the Bank Act, the Name Use (Foreign Banks) Regulations;
— pursuant to subsection 983(16) (see footnote 73) of the Bank Act, the Name Use by Non-financial Businesses (Excluded Entities) Regulations;
— pursuant to subsection 983(16) (see footnote 74) of the Bank Act, the Name Use in Securities-related Transactions (Banks and Bank Holding Companies) Regulations;
— pursuant to sections 1021 and 1026 (see footnote 75) of the Insurance Companies Act, the Name Use in Securities-related Transactions (Insurance Companies and Insurance Holding Companies) Regulations;
— pursuant to section 978 (see footnote 76) of the Bank Act, the Prohibited Activities Respecting Real Property (Foreign Banks) Regulations;
— pursuant to paragraphs 275(1)(a) to (d) and section 835 (see footnote 77) of the Bank Act, the Prospectus (Banks and Bank Holding Companies) Regulations;
— pursuant to paragraphs 299(1)(a) to (d) and section 883 (see footnote 78) of the Insurance Companies Act, the Prospectus (Insurance Companies and Insurance Holding Companies) Regulations;
— pursuant to paragraphs 275(1)(e) and (f) (see footnote 79) and section 835 (see footnote 80) of the Bank Act, the Prospectus Exemptions (Bank Holding Companies) Regulations;
— pursuant to paragraphs 275(1)(e) and (f) (see footnote 81) of the Bank Act, the Regulations Amending the Prospectus Exemptions (Banks) Regulations;
— pursuant to paragraphs 270(1)(e) and (f) (see footnote 82) of the Cooperative Credit Associations Act, the Regulations Amending the Prospectus Exemptions (Cooperative Credit Associations) Regulations;
— pursuant to paragraphs 299(1)(e) and (f) (see footnote 83) of the Insurance Companies Act, the Regulations Amending the Prospectus Exemptions (Insurance Companies) Regulations;
— pursuant to paragraphs 299(1)(e) and (f) (see footnote 84) and section 883 (see footnote 85) of the Insurance Companies Act, the Prospectus Exemptions (Insurance Holding Companies) Regulations;
— pursuant to paragraphs 280(1)(e) and (f) (see footnote 86) of the Trust and Loan Companies Act, the Regulations Amending the Prospectus Exemptions (Trust and Loan Companies) Regulations;
— pursuant to section 978 (see footnote 87) of the Bank Act, the Regulatory Capital (Bank Holding Companies) Regulations;
— pursuant to section 978 (see footnote 88) of the Bank Act, the Regulations Amending the Regulatory Capital (Banks) Regulations;
— pursuant to section 463 (see footnote 89) of the Cooperative Credit Associations Act, the Regulations Amending the Regulatory Capital (Cooperative Credit Associations) Regulations;
— pursuant to section 1021 (see footnote 90) of the Insurance Companies Act, the Regulations Amending the Regulatory Capital (Insurance Companies) Regulations;
— pursuant to section 1021 (see footnote 91) of the Insurance Companies Act, the Regulatory Capital (Insurance Holding Companies) Regulations;
— pursuant to section 531 (see footnote 92) of the Trust and Loan Companies Act, the Regulations Amending the Regulatory Capital (Trust and Loan Companies) Regulations;
— pursuant to sections 978 (see footnote 93) of the Bank Act and 1021 (see footnote 94) of the Insurance Companies Act, the Security Certificate Transfer Fee (Banks, Bank Holding Companies, Insurance Companies and Insurance Holding Companies) Regulations;
— pursuant to sections 389 (see footnote 95), 396 (see footnote 96) and 463 (see footnote 97) of the Cooperative Credit Associations Act, the Specialized Financing (Cooperative Credit Associations) Regulations;
— pursuant to sections 467 (see footnote 98), 474 (see footnote 99) and 978 (see footnote 100) of the Bank Act, the Specialized Financing (Banks) Regulations;
— pursuant to sections 494 (see footnote 101), 501 (see footnote 102) and 1021 (see footnote 103) of the Insurance Companies Act, the Specialized Financing (Life Companies) Regulations;
— pursuant to sections 389 (see footnote 104), 396 (see footnote 105) and 463 (see footnote 106) of the Cooperative Credit Associations Act, the Specialized Financing (Retail Associations) Regulations;
— pursuant to sections 452 (see footnote 107), 459 (see footnote 108) and 531 (see footnote 109) of the Trust and Loan Companies Act, the Specialized Financing (Trust and Loan Companies) Regulations;
— pursuant to sections 522.23 (see footnote 110) and 978 (see footnote 111) of the Bank Act, the Specialized Financing (Foreign Banks) Regulations;
— pursuant to section 978 (see footnote 112) of the Bank Act, the Subsidiaries that Hold Bank Holding Company Shares Regulations;
— pursuant to section 1021 (see footnote 113) of the Insurance Companies Act, the Subsidiaries that Hold Insurance Holding Company Shares Regulations;
— pursuant to section 531 (see footnote 114) of the Trust and Loan Companies Act, the Total Assets for Public Holding Requirements (Trust and Loan Companies) Regulations;
— pursuant to 978 (see footnote 115) of the Bank Act, the Total Assets for Supervisability and Public Holding Requirements (Banks and Bank Holding Companies) Regulations; and
— pursuant to section 1021 (see footnote 116) of the Insurance Companies Act, the Total Assets for Supervisability and Public Holding Requirements (Insurance Companies and Insurance Holding Companies) Regulations.
Interested persons may make representations with respect to the proposed Regulations within 30 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of this notice and be addressed to Mr. Gerry Salembier, Financial Sector Policy Branch, Department of Finance, L'Esplanade Laurier, 15th floor, East Tower, 140 O'Connor Street, Ottawa, Ontario, K1A 0G5.
Ottawa, August 1, 2001
RENNIE M. MARCOUX
Acting Assistant Clerk of the Privy Council
| definition | AGGREGATE FINANCIAL EXPOSURE (BANKS) REGULATIONS |
|---|---|
| INTERPRETATION | |
| Definition of "Act" | 1. In these Regulations, "Act" means the Bank Act. |
| AGGREGATE FINANCIAL EXPOSURE | |
| Aggregate financial exposure | 2. For the purpose of subsection 495.2(1) of
the Act, the aggregate financial exposure of a bank is the amount
determined by the formula
A + B + C - D whereA is the book value of all investments by the bank and its subsidiaries in securities of the related party; B is the total of the principal amounts of all outstanding loans to the related party that are held by the bank and its subsidiaries, other than (a) loans referred to in paragraph 491(a) of the Act, and (b) deposits made for clearing purposes with a financial institution that is a direct clearer or a member of a clearing group under the by-laws of the Canadian Payments Association; C is the total of all outstanding amounts in respect of endorsements, acceptances or guarantees by the bank and its subsidiaries on behalf of the related party, other than guarantees referred to in paragraph 491(a) of the Act; and D is the total of all amounts included in the value of A, B and C in respect of transactions referred to in section 490 of the Act. |
| COMING INTO FORCE | |
| Coming into force | 3. These Regulations come into force on the day on which section 495.2 of the Bank Act, as enacted by section 129 of the Financial Consumer Agency of Canada Act, chapter 9 of the Statutes of Canada, 2001, comes into force. |
[31-1-o]
S.C. 2001, c. 9, s. 183
S.C. 1991, c. 46
S.C. 2001, c. 9, s. 465
S.C. 1991, c. 47
S.C. 2001, c. 9, s. 569
S.C. 1991, c. 45
S.C. 2001, c. 9, s. 465
S.C. 2001, c. 9, s. 339
S.C. 1991, c. 48
S.C. 2001, c. 9, s. 465
S.C. 2001, c. 9, s. 569
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 465
S.C. 2001, c. 9, s. 465
S.C. 2001, c. 9, s. 339
S.C. 2001, c. 9, s. 569
S.C. 2001, c. 9, s. 132
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 339
S.C. 2001, c. 9, s. 569
S.C. 2001, c. 9, s. 465
S.C. 2001, c. 9, s. 43.1
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 127
S.C. 2001, c. 9, s. 132
S.C. 2001, c. 9, s. 314
S.C. 2001, c. 9, s. 426
S.C. 2001, c. 9, s. 437
S.C. 2001, c. 9, s. 550
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 339
S.C. 2001, c. 9, s. 465
S.C. 2001, c. 9, s. 569
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 339
S.C. 2001, c. 9, s. 465
S.C. 2001, c. 9, s. 569
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 339
S.C. 2001, c. 9, s. 465
S.C. 2001, c. 9, s. 569
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 100(2)
S.C. 2001, c. 9, s. 139(3)
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 127
S.C. 2001, c. 9, s. 127
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 437
S.C. 2001, c. 9, s. 439
S.C. 2001, c. 9, s. 465
S.C. 2001, c. 9, s. 314
S.C. 2001, c. 9, s. 314
S.C. 2001, c. 9, s. 339
S.C. 2001, c. 9, s. 426
S.C. 2001, c. 9, s. 426
S.C. 2001, c. 9, s. 465
S.C. 2001, c. 9, s. 465
S.C. 2001, c. 9, s. 550
S.C. 2001, c. 9, s. 550
S.C. 2001, c. 9, s. 569
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 127
S.C. 2001, c. 9, s. 314
S.C. 2001, c. 9, s. 426
S.C. 2001, c. 9, s. 465
S.C. 2001, c. 9, s. 550
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 465
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 465
S.C. 1999, c. 31, s. 11
S.C. 2001, c. 9, s. 183
S.C. 1999, c. 31, s. 11
S.C. 1999, c. 31, s. 55
S.C. 1999, c. 31, s. 140
S.C. 1999, c. 31, s. 140
S.C. 2001, c. 9, s. 465
S.C. 1999, c. 31, s. 215
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 339
S.C. 2001, c. 9, s. 465
S.C. 2001, c. 9, s. 465
S.C. 2001, c. 9, s. 569
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 465
S.C. 2001, c. 9, s. 314
S.C. 2001, c. 9, s. 314
S.C. 2001, c. 9, s. 339
S.C. 2001, c. 9, s. 127
S.C. 2001, c. 9, s. 127
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 426
S.C. 2001, c. 9, s. 426
S.C. 2001, c. 9, s. 465
S.C. 2001, c. 9, s. 314
S.C. 2001, c. 9, s. 314
S.C. 2001, c. 9, s. 339
S.C. 2001, c. 9, s. 550
S.C. 2001, c. 9, s. 550
S.C. 2001, c. 9, s. 569
S.C. 2001, c. 9, s. 132
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 465
S.C. 2001, c. 9, s. 569
S.C. 2001, c. 9, s. 183
S.C. 2001, c. 9, s. 465
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